Cash vs. Accrual Accounting

There are two main methods of accounting: cash accounting and accrual accounting. Normally if you have a small business you will use cash accounting, but if you have a larger business you should use accrual. Now you are probably wondering what is cash and accrual accounting? So I will explain the two.

Cash Accounting

Cash accounting is where you record the sales when cash is received, and record when cash is spent. Pretty straightforward. To do cash accounting you should always use an online accounting system or a standard notebook, to ensure that you are organized with the money being recorded.

Accrual Accounting

Accrual accounting on the other hand is where you record the revenue when the services or goods are delivered, regardless if cash was received. Also expenses are recognized as soon as the company receives the goods or services. 

In conclusion, cash accounting is the accounting method that is primarily used for small businesses, and accrual accounting is the method that is primarily used for large businesses.


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